NH to 'Taxachusetts': Bring it on

Massachusetts Gov. Deval Patrick's call for a hike in his state's already-high income tax is being welcomed on this side of the border with bipartisan open arms.

"Welcome to New Hampshire!" was the reaction of Wolfeboro Republican and state Senate Majority Leader Jeb Bradley.

"We should be putting up billboards," he said. "We have long marketed New Hampshire's attractiveness as a place to do business for precisely this reason.

"I think there are going to be a lot of people there who say that enough is enough and find New Hampshire much more attractive as a result of this."

Gov. Maggie Hassan's reaction to a fellow Democrat and New England governor was more tempered, but carried the same message.

"I appreciate that Massachusetts has its own unique challenges and Governor Patrick has to choose his own approach in meeting those," she told the Sunday News. "But if that approach leads to an economic boost for us, then I welcome it."

Hassan reiterated her campaign promise to veto income or sales tax legislation should it reach her desk.

"That's because I understand that our economy is based around not having a broadbased tax, and I think the tax would hurt middle class families and our businesses," she said.

Patrick's proposal would hike the Massachusetts personal income tax from 5.25 to 6.25 as part of a $1.9 billion plan for new transportation and education spending. It will soon go to a legislature dominated by Democrats.

It prompted Boston Magazine editor Patrick Doyle to write that after some tax reductions in recent years, his state is about to re-earn its nickname: "Taxachusetts."

Patrick has called for doubling the personal exemption from $4,400 to $8,800 for all taxpayers. But he also wants to eliminate many itemized deductions, apparently to have the burden of the hike fall on wealthier Bay State workers.

He also called for a cut in his state's sales tax, a more regressive tax that hits the poor harder than the rich, from 6.25 to 4.5 percent.New Hampshire's Bradley was unimpressed.

"Until their sales tax rate goes down to zero, I don't think it's going to do much for them," he said.

Patrick also wants to tie gas tax hikes to the rate of inflation to raise more than $100 million through the end of the decade.

Michael Bergeron, business development manager at the New Hampshire Department of Resources and Economic Development, said the Patrick income tax proposal will "absolutely" be used in his pitch to out-of-state businesses looking to move or expand.

"At least 60 percent of our leads come from Massachusetts," he said. "And we love it when Massachusetts does what they're good at."

According to information released by the Massachusetts Office of Administration and Finance, an individual earning $50,000-a-year will see his income tax slightly drop due to the higher exemption, but someone making $80,000 annually should expect a tax hike of about $600, to $4,450. An individual earning $120,000 will see his income tax bill go up by about $1,000 to $6,950.

A family of four earning $80,000 would see its tax go up by about $600 to $3,775. The tax on a family of four at $160,000 jumps by about $1,600 to $8,775 and a family of four at $180,000 will have an income tax hike of about $1,200 to $10,150.

Along for the tax hike ride are about 88,000 Granite State residents who work in Massachusetts, according to that state's Department of Revenue.

They paid $256.4 million in Massachusetts personal income taxes in 2009, the latest year available on the department's web site.

The number of New Hampshire residents who work in Massachusetts fluctuates. According to data compiled by the American Community Survey of the U.S. Census Bureau and cited for this report by a New Hampshire Department of Employment Security economist, the average number of Granite Staters who worked in Mass from 2010 through 2012 was 81,295.

The thousands of Massachusetts residents who work in New Hampshire must also pay the Massachusetts income tax, according to Dennis Delay, economist at the Center for Public Policy Studies.

At least one Bay State businessman says he is not worried about the Patrick tax hikes.

"We believe businesses actually have a lower cost of doing business in Massachusetts than moving to New Hampshire," said Joseph Bevilacqua, president of the Massachusetts Economic Development Council and the Merrimack Valley Chamber of Commerce in Lawrence.

"We hear to a great degree the most critical component is an available work force," Bevilacqua said, "and we're told that businesses find the quality employees they need on the Massachusetts side of the border."

"We're not taking a position on the governor's recommendations," he said. "We're simply saying that in concept, business does business better in Massachusetts and uses Massachusetts better as a home base for the sales of its products.

"Obviously, no one likes increased taxes," Bevilacqua said. But he said Patrick's plans to spend more money on education and infrastructure signals that "Massachusetts is looking to the future."

Besides, he said, "You (New Hampshire) have that business profits tax and some of the highest property taxes in the nation. And New Hampshire knows there is a hammer coming with respect to the funding of education."

Indeed, not all is rosy in New Hampshire, or at least not as rosy as in the past.

Economist Delay wrote in a report last September the long-heralded "New Hampshire Advantage" is not what it once was.

The population increase has stopped; the state is actually losing some residents and the population is aging, he said.

"They are also creating jobs at a faster pace in Massachusetts than we are right now," Delay said. "That has to do with the mix of industry down there. It is centered in high-tech and manufacturing and, proportionally, they have more of that than we do right now.

"We still have a lower tax burden, but our relative advantage has lessened," Delay said.

Hassan, however, maintained: "We've continued to out-perform our neighbors during this recession. Our low-tax policy works.

"In addition to maintaining our low-tax environment, which is critical to our economy and to the New Hampshire advantage, we also have to focus on our other advantages, too, which are a highly educated work force, a remarkably accessible and open government, our natural resources and our high quality of life," the governor said.

She noted that she has told agency heads to submit budgets that are 3 percent lower than in the current fiscal year.

"We are very focused on having as lean a budget as possible," she said. "I also have been supporting one high-end, highly-regulated casino. I think that's a really practical and positive way of raising revenues."

She said the 10 cents-a-pack cut in the cigarette tax cut made in the current budget should be eliminated to produce about $20 million.

Business and Industry Association of New Hampshire President Jim Roche and PolEcon Research economist Brian Gottlob agreed that the Patrick plan, if passed into law, would help New Hampshire's competitive advantage, but to what degree, Gottlob said, is unclear.

Lowering the Massachusetts sales tax "probably will have benefit to households here," he said, "but I don't think it's going to have much of an impact in terms of retail sales here in New Hampshire. There is a certain connotation to being able to say, 'We're tax free,' rather than just being able to say, 'We're marginally lower than Maine.'"